A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
The International Energy Agency seems startled by the rapid decline in global oil demand growth calling the trend "nothing short of remarkable," according to a Wall Street Journal report.
The most recent IEA update cites the slowing Chinese and European economies for demand levels that are at a two-and-a-half year low.
The short term future of the oil price is complicated by a cooler North American summer that crimped air conditioning use as well as by seasonal factors – refineries are currently switching from gasoline production to heating oil and other distillates. In addition, the ongoing investigation into resource inventories at Chinese ports is reducing credit availability for companies looking to import all commodities.
"IEA cuts 2015 oil demand forecasts" – Wall Street Journal
Reuters details evidence that the recent corruption crackdown in China is providing yet another surge higher for Vancouver real estate prices. The report cites interviews with local realtors indicating "Chinese buyers were largely behind the latest rally" in homes in the $2-to-$5-million price range.
A separate report from the Financial Times' Alphaville blog highlights the incredible scale of Chinese financial corruption. The enviably knowledgeable David Keohane points to Nomura estimates that three percent of China's gross domestic product, or $4-trillion yuan ($717.7-billion) has been siphoned away by corrupt officials. A mere fraction of this amount is enough to keep Vancouver housing prices heading higher for good long time.
"Vancouver prime property market sizzles, fueled by China cash" – Reuters
"China's anti-corruption trillions" – Keohane, FT Alphaville (registration required)
Few issues fire up Canadian economists like accusations that the domestic economy suffers from "Dutch Disease," a malady involving a dependence on resource wealth that limits innovation in all other sectors (and also inflates the value of currencies, making exports less competitive).
George Mason economics professor and all-around polymath Tyler Cowen highlights some interesting new research on the issue using the Forbes' list of the world's wealthiest people: "Forbes list of the 92 people who are worth ten billion dollars or more in 2012. Where do they make money? 11 of them made it in technology,…. There are 25 people who made it in mining natural resources. You probably haven't heard their names. And these are basically cases of technological failure, because commodities are inelastic goods"
The assumption that resource wealth is synonymous with technological failure is a highly interesting topic for Canadian economists and one I'd like to see discussed further.
"Does natural resource wealth imply technological stagnation?" – Cowen, Thiel, Marginal Revolution
China's spending spree on global commodity assets may be coming to an end. The Wall Street Journal highlights the numerous, expensive failures that have occurred so far. In one case, the pricing of a huge Australian property involved the assumption that Chinese labour, at Chinese wage levels, could be imported to work the mine. The report notes,
"Many big-ticket deals are losing money, running into unexpected costs or generating significantly less output than expected. Some Chinese investors are moving away from resources – a shift that could mean less Chinese money for countries in places like Africa, Latin America and the Middle East." And Canada.
"China's global mining play is failing to pan out" – WSJ
Tweet of the day "@auaurelija nothing will save #AUD nor other commodity FX"
Diversion: " How millennials spend" – The Atlantic
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Scott Barlow